Category Archives: business

Now comes word that AOL’s CEO, Tim Armstrong, is putting the finishing touches on the finale of Patch.com, the online local news sites. In his column today, NYTimes‘ David Carr reports that Armstrong is throwing in the towel on what used to be his baby. Too bad it didn’t work out.

There was a time when Patch looked like it might be an important part of the journalistic future. It was based on a key insight: more people were getting their news and information online, so why not local news? (Plus, there are a lot of local pizza parlors and nail salons that might advertise in such a site but would not be bothered advertising on a bigger site, because they would be paying to reach a lot of people who would never wander into their shops.)

While it lasted, Patch was a source of entry-level jobs for our journalism students, and I am worried about what will replace it.

Here’s Carr’s take:

The theory was that Patch would use a single news person and a single advertising person, at least initially, to create a digital maypole in hundreds of communities at a cost of about $100,000 annually per site. Patch sites popped up across the country, like Calabasas, Calif., and Nashua, N.H., covering high school sports, city elections and other local fare.

The execution risk was large — Patch was all moving parts, many undermanaged. At its peak, some 900 sites employed 1,400 people. Much of the journalism was pedestrian, while some of it, especially during Hurricane Sandy, was deeply important, but the decision to start at such a large scale was crippling. And all local efforts, digital or not, confront the tyranny of small numbers. Both the journalism and the ad sales were hand-to-hand, a retail effort that required spending a lot of money to go after pretty small revenue.

In August, it was clear that the math would not work. More than 350 people at Patch were laid off and hundreds of sites were shuttered.

What strikes me is the amount of money Armstrong was able to shovel into it — $300 million. Even for corporate moguls, that’s not nothing. Maybe that’s what was wrong all along: if you want to live online, keep your costs down.

Now comes a campaign from a coalition of high-tech companies who want the government to get out of the business of routinely spying on Americans in peacetime. They are organized under the banner of ReformGovernmentSurveillance.com (What’s the matter? Was the domain name EndGovernmentSurveillance taken?).

The founders include the biggest names in tech and social media in America:

AOL (maybe I buried the lead: are they still in business?)

Apple

Facebook

Google

LinkedIn

Microsoft

Twitter

Yahoo.

According to a full-page ad in today’s NYTimes, the coalition members want the president and Congress to put an end to abuses carried out in the name of national security by the NSA and other government agencies. That’s great as far as it goes, and I welcome them to the movement to control the government.

While they are at it, though, those same companies would do well to honor their own customers‘ privacy and quit trying to pry more data and pics out of us to exploit for gain. Set a good example.

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[Update: TNR weighs in with a piece stressing the perils of self-censorship.]

Through their statements and actions, the leaders of China are showing their true colors. For all their talk about moving toward a more modern, open, accountable society, China’s leaders refuse to budge on one issue. Their policies indicate that what they fear above all — even more than U.S. fighter jets cruising through contested air space — is a free press. Specifically, they fear a U.S.-style press that insists on afflicting the powerful by investigating them.

The evidence is in the Chinese handling of recent revelations by reporters for the New York Times and Bloomberg. American journalists who cover China have made dramatic disclosures about how the families who hold power in China manage to use that power to enrich themselves personally. The bar for this kind of reporting was set by David Barboza of the Times (and a Boston University alumnus, BTW), whose series “The Princelings” won a Pulitzer Prize earlier this year.

The Chinese reaction was characteristically blunt: the government in Beijing pulled the plug on the NYTimes in China, banning the print and electronic editions. Now the government is dragging its heels on renewing the visas that journalists like Barboza need to stay in the country and continue their work.

Here is a quote from a Chinese Foreign Ministry official that captures the issue perfectly:

“As for foreign correspondents’ living and working environments in China, I think as long as you hold an objective and impartial attitude, you will arrive at the right conclusion.”

What this reveals is an outlook that holds that there is a “right conclusion” — which is determined by the Communist Party — and that the task of journalists is to discern the party’s views and stick to them. In other words, don’t rock the boat.

The issue is such an irritant between the U.S. and China that vice president Joe Biden put it on the agenda during his visit to China this week. From today’s NYT version:

Vice President Joseph R. Biden Jr. raised the issue here in meetings with President Xi Jinping and other top Chinese leaders, and then publicly chastised the Chinese on Thursday for refusing to say if they will renew the visas of correspondents and for blocking the websites of American-based news media.

“Innovation thrives where people breathe freely, speak freely, are able to challenge orthodoxy, where newspapers can report the truth without fear of consequences,” Mr. Biden said in a speech to an American business group.

At a meeting on Thursday with Beijing-based reporters from The New York Times and Bloomberg, Mr. Biden said that he warned Chinese leaders, in a formal session and over dinner, that there would be consequences for China, especially in the Congress, if it forced out the journalists. But he said Mr. Xi appeared unmoved, insisting that the authorities treated reporters according to Chinese law.

If only the U.S. had some good options for pressuring the Chinese. We could exclude Chinese journalists from working in the United States, but that’s a terrible idea. We do not want to sink to the level of unprincipled tactics used by the Chinese, and we want to encourage more coverage of America in China, not less.

I don’t have a great answer here, except for patience. It is an article of faith with me that the truth will out and that in the long run, the power of the press will win out. Besides, I have one other reason for optimism: I teach a lot of young Chinese students about American journalism — its history, its principles, its techniques. Most of them go back to China, and when they return they bring some lessons they are unlikely to unlearn.

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A hat-tip to the talented team at NPR’s “Planet Money.” They are spinning a yarn this week about how a T-shirt is made, from start to finish. Best of all, they decided to actually make a specific T-shirt of their own, and reporters worldwide are contributing to a narrative that traces the arc of that T-shirt from the cotton fields of the Deep South to a robotic yarn-spinning factory in Indonesia and god-knows-where next.

No surprise: the deal announced last summer has finally closed. The NYT Co. has sold the Boston Globe (and a bundle of other New England news properties) to the wealthy investor John Henry. The price was $70 million, or 6.3% of the $1.1 billion that the New York Times paid for the Globe 20 years ago.

Henry, who made a fortune in commodity trading, already owns several important sports ventures —

notably the hometown MLB franchise, the Boston Red Sox. (How the Globe sports department will cover the Sox remains a touchy, unresolved issue that will not go away.)

Henry also owns the Liverpool Football Club, which is ranked third in the English Premier League of the sport we commonly call soccer. Here’s a page of links to Henry-related stories from the British newspaperThe Guardian. Here’s the comparable page from the Liverpool Echo, consisting mainly of sports stories that say little about Henry.

The reason that I am searching British media for information about Henry is that he is rarely written about here. Although he has been one of the principal owners of the Boston Red Sox for years now, he is still pretty much of an enigma. He shows up in photos at the occasional charity or celebrity event, and his courtship and marriage of Linda Pizzutti (who hails from my hometown — Medford, Mass.) in 2009 produced a portfolio of rather icky photos.

Boston magazine has attempted to cover Henry, and I hope they continue to do so.

The question that awaits an answer is: how will the Globe cover its new owner? This is an inherently awkward (and possibly impossible) assignment for any news organization, since readers will always have to wonder whether any punches were pulled. To report fully and write honestly about the person who signs your paycheck is hard enough; to convince people that you are really telling the whole story means somehow overcoming the apparent conflict of interest involved. It will be a test of the Globe’s independence and its credibility as a journalistic enterprise if it even attempts to cover the new owner.

As for Henry, much remains to be seen. Here are some questions I have:

Will he be an engaged owner?

Will he keep the valuable Brian McGrory as top editor?

Will he endorse political candidates?

Will he stand by the paper’s metered pay system for online access?

Will he order up expanded coverage of English soccer?

Will he tolerate critical coverage of the Red Sox?

Will he sell the land and buildings at Morrissey Boulevard?

Will he sell the printing presses and trucks and take the Globe into a post-print future?

Why should journalism depend on advertising? There is nothing logical, necessary or inevitable about it.

Originally, advertising was a trivial source of income for 18th Century newspapers. Instead, readers supported those newspapers by subscribing for fixed (and pretty lengthy) periods. there were few if any newsstand sales. That model worked for more than a century.

It was only in the 19th Century that newspaper publishers began seeking and relying on advertising revenues. This coincided with an explosion of spending on ads, so there was plenty of money sloshing around to allow newspapers to expand. By the end of the 19th Century, many newspapers derived half or more of all their revenues from ads.

When broadcasting came along in the 20th Century, most radio and television operations could not find a way to get their audience to pay, so they became almost completely dependent on advertising income. (NPR and PBS are exceptions; they depend on a shifting mix of foundation grants, “sponsors,” a shrinking direct government subsidy, and the direct financial support of “viewers (and listeners) like you.”)

There, in broad strokes, is a big part of the current existential crisis facing all the “legacy” media with a foot in the pre-digital past. They arose under a set of conditions that no longer exist. Advertisers have reduced their spending overall, and they have reallocated the remaining ad buy so that they can buy a growing amount of space online. They are not coming back to print or broadcasting.

So, if advertisers cannot be depended on to fund journalism, who’s left?

One answer is pointed to by David Carr in his column today. Ostensibly, his column is about HBO and the success of such tv “auteurs” as the creators of The Sopranos and The Wire. Carr observes that HBO never depended on ads, so HBO’s executives never had to worry about what kind of programming advertisers would accept. Instead, the only constituency they had to please was viewers, who flocked to the better (if violent) programs. It was a case of “viewers to the rescue.”

From Carr’s column:

As it turned out, what had been holding television back was not the audiences, but the advertisers. HBO, freed of those bonds as a pay TV service, bet on a show about a fat, conflicted gangster who spent time in a shrink’s office when he wasn’t ordering up murders from the back of a strip club called the Bada Bing.

HBO had figured out that the strategy followed by broadcast networks — trying to please all of the people at least part of the time — was a losing formula for a pay service. Instead it began producing remarkable programming for a discrete audience that would pay a premium for quality. That audience has ballooned to some 30 million viewers and turned HBO into an A.T.M. for Time Warner, a lesson that was not lost on other cable channels. This revolution will continue to be televised.

In cable TV, unlike traditional broadcasting, money comes from “subscribers” — i.e., you and me and everyone else who overpays Comcast or Verizon or some other cable provider. All our monthly bills go into a giant pot, and cable providers turn around and dole it out to the suppliers of programming — X for ESPN, Y for all the NBC properties, Z for Fox, and so on. The details are the result of negotiations based mainly on who’s hot and who is bringing in the biggest audience.

HBO is just one example of a model that could be used to pay for all sorts of creative and valuable original materials. Consider: if I buy a song on iTunes, there is no jingle that I have to listen to first (or in the middle!). If I buy a book, there’s no ad on page 178. In those markets, I expect to pay the full amount, without a subsidy from advertisers.

Can the journalism that has been brought to us by newspapers, magazines, and television be funded without advertising?

Yes, the New York Times company reported a sharp drop in earnings this week.

Yes, the figures for advertising revenue were wretched and getting worse.

BUT, buried in the financial details, there is some potentially important good news: Money coming in from circulation is rising. In fact, it rose 6.5% in the first quarter of this year compared to the same quarter a year ago. Therein may lie the salvation of the most important news organization in the country.

The reason is that “circulation revenue” is all the money coming in from the subscriptions to the traditional print edition, the dollars paid by folks picking up a copy of the Times at newsstands, and — most important of all — the money coming in from digital subscribers who bumped into the Times “paywall” and decided to pony up and pay for full access to the Times online. They are important because they are the future. In the digital era, the key metric is whether you can make money online. Historically, newspapers depended on a “dual revenue stream” of money coming from both circulation and advertising. For more than a century, both sources increased, and they fluctuated around a ratio of 50/50 in terms of total revenues.

If the Times can continue to gain readers who will pay, then there is no reason it could not sustain itself mainly on the basis of its own readers — who are, ultimately, a better base for journalism than advertisers. Thank you, Tiffany and Bloomingdales, and may your ad spending continue. But ultimately, the Times might be better off if it were funded like the old PM newspaper, or I.F. Stone’s Weekly, or NPR, or the AP or other news organizations that do not depend on advertising.

According to the latest figures, readers now account for a majority of the Times revenues.

Here’s a chart from the company’s press release.

First Quarter

2013

2012

% Change

Revenues

Circulation

$

241,789

$

226,994

6.5

%

Advertising

191,167

215,234

-11.2

%

Other(a)

32,977

33,204

-0.7

%

Total revenues

465,933

475,432

-2.0

%

When I looked at the numbers more closely, here’s what I found on a percentage basis:

First quarter

[ 2013 2012

Revenues

Circulation 51.8% 47.7%

Advertising 41.0% 45.2%

Other 7.1% 6.9%

So, it appears that “the people formerly known as the audience” are pointing the ( or a?) way forward.

Readers to the rescue!

This chart (which I customized using a tool on the NYTCo corporate site) shows how the NYTCo stock has performed in the last six months, compared to the Dow Jones average, which has been on a tear.